Financial Consolidation, Reporting, and Analysis …

1 Financial consolidation , reporting , and Analysis Solutions for Government An Oracle White Paper Updated July 2008 Financial consolidation , reporting , and Analysis Solutions for Government Page 2 Financial consolidation , reporting , and Analysis Solutions for Government Executive Overview .. 3 Introduction .. 3 Financial consolidation and reporting Requirements .. 4 Approaches to Financial consolidation and 5 Packaged Applications .. 5 Enterprise Resource Planning Systems .. 7 General Tools .. 8 8 Data 8 Cost of Support .. 10 Financial and Enterprise Performance Management Solutions .. 10 Packaged Solutions and the Fast Close .. 13 14 Improve Accessibility .. 14 Improve Efficiency .. 14 Maximize 14 Integrating Financial and Transaction 15 Multiple Enterprise Resource Planning 16 Single Enterprise Resource Planning 16 Adding Value to Enterprise Resource Planning Systems.

2 16 The Fastest 17 Self-Service Financial Information .. 17 Improving 17 Transitioning to a Single Enterprise Resource Planning 17 18 Financial consolidation , reporting , and Analysis Solutions for Government EXECUTIVE OVERVIEW Today s government agencies face a vast range of complex Financial reporting and consolidation requirements and ever-increasing scrutiny by auditors. Transaction systems such as enterprise resource planning (ERP) systems should not be the automatic choice for Financial consolidation and reporting requirements. Financial consolidation , reporting , and Analysis (FCRA) applications can provide significant value to government entities by enabling flexible, accurate, and rapid reporting that integrates with current ERP systems. INTRODUCTION Financial reporting requirements come from a variety of sources, including federal agencies and independent organizations, and can be very complex.

3 Regulatory scrutiny has never been higher especially with the recent revision of the Office of Management and Budget s (OMB) Circular A-123, influenced by the Sarbanes-Oxley Act (SOX). There are various approaches and software packages that can help companies automate the consolidation and reporting cycle. Of these options, packaged FCRA applications with purpose-built features will deliver the highest return on investment by improving the speed and quality of the Financial close. To deliver the most value, the finance or accounting staff that compiles and creates the Financial reports should administer and maintain the FCRA solution. Regulatory scrutiny has never been higher especially with the recent revision of the OMB Circular A-123, influenced by the Sarbanes-Oxley Act. FCRA applications act as a consolidated book of record. They provide audit trails and permanent storage of the consolidated results so that internal and external auditors can test and verify data.

4 But FCRA applications also help organizations with management reporting , a process by which government organizations examine and analyze information about performance to plan for change. The FCRA application is a module of an enterprise performance management (EPM) solution. EPM solutions complement and integrate with various underlying transaction systems, including ERP systems. The applications that comprise an EPM system provide comprehensive support for the entire management cycle of goal setting, modeling, planning, monitoring, Analysis , and reporting . Like all modules of the Oracle enterprise performance management system, Oracle Hyperion Financial Management can be run independently to address this particular segment of the management cycle. But when it is integrated with all the The applications that comprise an EPM system provide comprehensive support for the entire management cycle of goal setting, modeling, planning, monitoring, Analysis , and reporting .

5 Financial consolidation , reporting , and Analysis Solutions for Government Page 3 modules of Oracle s enterprise performance management system, it supports an efficient closed-loop performance management process that improves insight and generates better decisions. Financial consolidation AND reporting REQUIREMENTS For most government organizations, it is challenging to aggregate historical results in monthly or quarterly reports. One of the greatest challenges is meeting requirements for both statutory/legal and management reporting . Statutory reporting refers to the Financial reporting requirements, standards, and guidelines defined by federal agencies, independent organizations, acts of Congress, and executive orders. Management reporting is the operational intelligence that organizations gain from internal Analysis that helps them monitor results and plan for future change.

6 Management reporting is the business intelligence that organizations gain from internal Analysis that helps them monitor results and plan for change. These requirements, standards, and guidelines come from many sources, including Federal Accounting Standards Advisory Board (FASAB) Office of Management and Budget (OMB) Circulars Financial Systems Integration Office (FSIO) Federal Financial Management Improvement Act (FFMIA) Chief Financial Officer s Act (CFO Act) President s Management Agenda (PMA) Figure 1: There are many sources of federal Financial reporting guidelines. Financial consolidation , reporting , and Analysis Solutions for Government Page 4 To achieve the purpose of consolidated Financial statements, those statements must report as faithfully as possible the Financial position, results of operations, and cash flows of an organization and its component departments, agencies, and instrumentalities.

7 Underlying that conclusion is the public s need for relevant, reliable, and comparable Financial information. This information is necessary to maintain public confidence, and to enable legislators, executives, and the public to assess an entity s performance and effectiveness in administering its programs. A fair assessment of an entity s performance relies on information about all the activities related to the economic resources that it controls. A fair assessment of an entity s performance relies on information about all the activities related to the economic resources that it controls. For today s government agencies, complying with statutory and management reporting requirements can be a daunting task. And without robust consolidation and reporting processes, it becomes a difficult if not impossible task. APPROACHES TO Financial consolidation AND reporting There are three basic methods for Financial consolidation and reporting (Figure 2): Packaged or best-of-breed applications (FCRA applications) ERP systems General tools These primary methods were identified in a study by BPM International.

8 In 2006, BPM International surveyed 130 of the largest corporations in the world across all industries to identify common traits of top-performing finance departments; this study can provide useful insights to government agencies. The study found that 59 percent of survey respondents used packaged applications, while 29 percent used an ERP or general ledger/ERP system. The remaining 12 percent used general tools, such as spreadsheets and data warehouses. Packaged Applications The study showed that packaged applications also known as best-of-breed applications were twice as popular overall as the next most common choice, the ERP system. Further, packaged applications were an even more common choice in the top 25 best-performing finance departments (Figure 2). The study showed that finance departments ranking in the top 25 used packaged applications between 65 percent and 76 percent of the time.

9 The BPM International study showed that packaged applications also known as best-of-breed applications were twice as popular overall as the next most common choice, the ERP system. Financial consolidation , reporting , and Analysis Solutions for Government Page 5 Figure 2: Percentages of top 25 finance departments using each Financial reporting Packaged applications will address both statutory/legal and management reporting requirements. Oracle Hyperion Financial Management is classified as a packaged FCRA application. For a software solution to be classified as a packaged FCRA application, it must do all of the following: Structure and automate. Typically used by finance teams in midsize-to-large publicly traded corporations and government agencies, FCRA applications structure and automate the monthly or quarterly aggregation of historical results.

10 These applications embed rules, procedures, and techniques with an accompanying methodology, fulfilling specific statutory/legal reporting requirements associated with the period-end Financial close. FCRA applications structure and automate the monthly or quarterly aggregation of historical results. These applications embed rules, procedures, and techniques with an accompanying methodology. Support management reporting . FCRA applications allow users to analyze information about the organization s performance and help to plan for change, a process collectively known as management reporting . FCRA applications perform functions that are ad hoc, involve creativity, and address what-if scenarios. They allow companies to do the following: Analyze unique events such as modeling a new organization structure, revising the existing structure.